3GSM: Nokia, Sanyo to create CDMA JV

BARCELONA, SPAIN--Nokia said today it was shuttling its reblooming CDMA handset business into a new cross European/Asian partnership. Nokia is forming a joint venture with Japan’s Sanyo to create a global CDMA business that company officials said could compete among the top tier of CDMA vendors.

The new company--which will be known as Nokia Sanyo to most of the world but called Sanyo Nokia in Japan--will have major operations in San Diego as well as in Osaka and Tottori, Japan. Both companies will contribute their core CDMA assets and produce cellphones and other wireless terminals independently of their other wireless businesses and marketed under a new brand name, which the companies did not announce today.

A Nokia spokesman said the deal plays on the strengths of both companies with relatively little regional and customer segment overlap. Nokia’s handset strength is in Latin America and more recently in North America while Sanyo has a strong business in Japan, a market in which Nokia has no presence. Meanwhile, Nokia’s CDMA lines focus on entry-level and mid-tier devices while Sanyo plays in the mid-to high-end range, the spokesman said.

“The two companies are really combining their strengths,” the spokesman said. “The combined company would be one of the top two CDMA manufacturers in the world.”

Though Nokia doesn’t break out CDMA versus GSM handset shipments, research firms peg Nokia as the No. 3 CDMA handset manufacturer in the world and Sanyo far lower in the pack with its operations outside of Japan concentrated mainly with carrier Sprint in the U.S. The combined company, however, would likely claim the No. 2 slot, behind global CDMA giant Samsung.

The deal isn’t completed, however, until Nokia and Sanyo sign a final agreement in the second quarter. If all goes as planned and the companies get the proper regulatory approval, they expect to start business in the third quarter.

Nokia’s CDMA fortunes have waxed and waned as the vendor has struggled to bring the cache of its world-leading brand to the second technology standard. Part of the reason for the struggle has been its ongoing war with CDMA technology powerhouse Qualcomm, whose MSM chipset Nokia has refused to buy. Qualcomm is the major patent holder in CDMA, and Nokia has challenged its patents in court repeatedly. The new joint venture, however, may give Nokia a graceful way to bow out of that fight. Since the business would make its own purchasing and manufacturing decisions it could choose to make the Qualcomm MSM the baseband core of its new phones. Nokia Japan President Tyler McGee confirmed to Reuters that was a definite possibility today.

The joint venture also smacks of similarity to the Sony Ericsson joint venture, which started out sluggishly when it first launched but has been gaining significant market share in the last two years. Nokia expects that the company will give it significant R&D savings as it won’t have to pursue two separate technology tracks in its own handset division. Nokia would also gain access to Sanyo’s EV-DO porfolio, a market Nokia has yet to crack, though is has. submitted one device for the FCC for approval.

“We estimate that the creation of this separate, associated company will provide Nokia with financial benefits from start,” said Olli-Pekka Kallasvuo, president and chief operations officer, in a statement. “It also offers both parties timely access to R&D competencies that complement their own internal strategies."